WPX 3Q12: $64M Net Loss, But Production in Marcellus up 333%
WPX Energy, a company formed in January 2011 by Williams (created by spinning off the Williams exploration and production division) released their third quarter financial and operational update last week. The report losing $64 million in 3Q12. Most of WPX’s operations and focus has been in plays other than the Marcellus, including a big focus on the Bakken Shale, where they drill for oil, and the Piceance Basin in northwestern Colorado where they drill for wet natural gas.
In comparison, the Marcellus (where they drill for dry natural gas) is much smaller. However, the Marcellus was the only natural gas play in which WPX has production where the numbers went up in 3Q12. Production in the Piceance, Powder River Basin and San Juan Basin all went down between 7% and 16%. The Marcellus? Up an astonishing 333% from 3Q11 (although the overall numbers are still pretty small, see below). WPX reports they have drilled and completed 28 wells in the Marcellus so far in 2012—all of them in Susquehanna County, PA. They have two rigs operating in the Marcellus.
MDN has extracted out relevant sections of the WPX update that deal with the Marcellus:
Natural gas production in the Marcellus Shale rose four-fold to 65 MMcf/d vs. 15 MMcf/d a year ago
WPX reported an unaudited net loss attributable to WPX Energy of $64 million for third-quarter 2012, or a loss of $0.32 per share on a fully diluted basis, compared with net income of $14 million, or $0.07 per share, in third-quarter 2011.
The decrease in third-quarter 2012 was driven primarily by lower natural gas and NGL commodity prices vs. the 2011 period. Revenues in the 2012 period – not including gas management activities – declined 24 percent vs. third-quarter 2011, driven by significantly lower net realized average prices for natural gas and NGL production.
Third-quarter 2012 results also were impacted by approximately $22 million in net losses on derivatives not designated as hedges, compared with $12 million in net gains in third-quarter 2011.
“Operationally, we’re levered toward a gas price recovery, particularly in the Piceance Basin and in Susquehanna County in the Marcellus Shale.
Natural gas production in the Marcellus Shale continued to improve. Third-quarter 2012 volumes of 65 MMcf/d were up more than four-fold vs. a year ago, despite an estimated 30 MMcf/d that was curtailed by infrastructure challenges.
GUIDANCE FOR PRODUCTION, ADJUSTED EBITDAX AND CAPITAL SPENDING
For the first nine months of 2012, WPX made approximately $1.12 billion of capital investments in its domestic operations, including $320 million in the third quarter. These investments are predominantly in the Bakken Shale, Piceance Basin and Marcellus Shale where the company generates its highest returns.
In the Marcellus Shale, WPX completed 28 gross (23 net) wells during the first three quarters of 2012. WPX currently has two fit-for-purpose rigs in Susquehanna County.
Efficiencies continue to be reflected in Marcellus drilling times. WPX’s new record drilling time in the area is 11.4 days, which was set in the third quarter. The company also has reduced its completion costs in Susquehanna County by 35 percent since the fourth quarter of 2011.*
*WPX Energy (Nov 1, 2012) – WPX Energy Announces Third-Quarter 2012 Results